Is India a "success"?

Louis Proyect lnp3 at
Tue Jan 21 08:59:04 MST 2003

The economies of South Asia – and especially India – are often portrayed 
in comparative discussion as among the ‘success stories’ of the 
developing world in the period since the early 1990s. The sense that the 
Indian economy performed relatively well during this period may simply 
reflect the much more depressing or chaotic experiences in the rest of 
the developing world, with the spectacular financial crises in several 
of the most important and hitherto dynamic late industrialisers in East 
Asia and Latin America, and the continuing stagnation or even decline in 
much of the rest of the South. In comparison, the Indian economy, and 
indeed most of the smaller economies of the region, were largely stable 
and have been spared the type of extreme crisis that became almost a 
typical feature of emerging markets elsewhere. But the picture of 
improved performance is a misleading one at many levels, since in fact 
both India and the entire South Asian region as a whole experienced 
economic growth which was less impressive than the preceding decade’s. 
Further, across the region this growth pattern was marked by low 
employment generation, greater income inequality and the persistence of 
poverty. In other words, despite some very apparent successes in certain 
sectors or pockets, on the whole the process of global economic 
integration did little to dramatically improve the material condition of 
most of the population.

In India, the rate of growth of aggregate GDP in constant prices was 
between 5.5 percent and 5.8 percent in each five-year period since 1980, 
and the process of accelerated liberalisation of trade and capital 
markets did not lead to any change from this overall pattern. Further, 
while investment ratios increased (as a share of GDP), this reflected 
the long-term secular trend, and in fact the rate of increase 
decelerated compared to earlier periods. More significantly, the period 
since 1990 has been marked by very low rates of employment generation. 
Rural employment in the period 1993-94 to 1999-2000 grew at the very low 
annual rate of less than 0.6 percent per annum, lower than any previous 
period in post-independence history, and well below (only one-third) the 
rate of growth of rural population. Urban employment growth, at 2.3 
percent per annum, was also well below that of earlier periods, and 
employment in the formal sector stagnated. The only positive feature was 
the decline in educated unemployment, largely related to the expansion 
of IT-enabled services in metropolitan and other urban areas. However, 
while this feature, along with that of software development, has 
received much international attention, it is still very insignificant in 
the aggregate economy.

Other indicators of the Indian economy point to disturbing changes in 
patterns of consumption. Thus, per capita foodgrain consumption declined 
from 476 grams per day in 1990 to only 418 grams per day in 2001. The 
National Sample Survey data also suggest that even aggregate calorific 
consumption per capita declined from just over 2200 calories per day in 
1987-88 to around 2150 in 1999-2000. It has been argued that this may 
represent the positive diversification of consumption away from 
foodgrain that is associated with higher living standards. But, usually 
the aggregate foodgrain consumption does not decline due to indirect 
consumption (for example, through meat and poultry that require feed). 
In any case, the overall decline in calorific consumption (covering all 
food products) suggests that the optimistic conclusion may not be valid.

Given the aggregate growth rates and the evidence of improved lifestyles 
among a minority, this points to substantially worsening income 
distribution in India, which is also confirmed by the survey data. While 
the evidence on poverty has been muddied by changes in the procedure of 
data collection, which have made the recent survey data non-comparable 
with earlier estimates, overall indicators suggest that while the 
incidence of head-count poverty had been declining from the mid-1970s to 
1990, subsequently that decline has been slowed or halted, as indicated 
by the economist Abhijit Sen. Meanwhile, declining capital expenditure 
by the government has been associated with more infrastructural 
bottlenecks and worsening provision of basic public services.



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